Interest Rate Cuts in 2 Days: Easy Money Returns (Along with Inflation)!

Summary

The video discusses the Federal Reserve's upcoming interest rate cut, with a 0.25% or 0.5% cut expected on September 18th. The presenter covers potential impacts on the stock market, mortgage rates, and savings accounts. While a rate cut could cause short-term market fluctuations, historically, markets trend upward in the long run. The presenter advises caution with CDs and warns that an easier monetary policy may devalue the dollar against commodities, and potentially lead to re-accelerated inflation by 2026. The labor market is predicted to remain challenging for the year.

Takeaways

• 📅 The Federal Reserve is expected to cut interest rates on September 18th.
• ❓ The decision is between a 0.25% or 0.5% rate cut, with a 0.5% cut currently favored by the market.
• 📊 Market expectations as of Monday show a 39% chance for a 0.25% cut and a 61% chance for a 0.5% cut.
• 🔮 The Federal Reserve will also provide economic projections, giving insights into future rate decisions.
• 📉 Historically, stock markets have varied in the short term after rate cuts but tend to rise in the long term.
• 🏠 The housing market is anticipated to be affected, with mortgage rates expected to drop further.
• 💵 Interest rates on savings accounts and CDs are likely to decrease as the Federal Reserve lowers rates.
• 🏦 There are currently banks offering 4% to 5% interest rates, but these rates are expected to decrease by 2025.
• 🔒 It's suggested not to lock in a CD for a long term at rates below 4%, with a preference for shorter terms.
• 💵 The devaluation of the US dollar is a complex issue and depends on comparison with other fiat currencies or commodities.
• 🚨 The speaker predicts a worsening labor market and a return of inflation due to the easy monetary policy, with 2026 expected to be worse than 2024.

Q & A

What is the expected action by the Federal Reserve on September 18th?

The Federal Reserve is expected to cut interest rates on September 18th.

What are the two possible interest rate cuts being considered by the Federal Reserve?

The two possible interest rate cuts being considered are 0.25% and 0.5%.

As of Monday, what are the market expectations for the interest rate cut by the Federal Reserve?

As of Monday, there is a 39% chance of a 0.25% cut and a 61% chance of a 0.5% cut in interest rates.

What will the Federal Reserve provide on Wednesday that can give insight into future actions?

The Federal Reserve will provide their projections on Wednesday, which will give insight into their actions in November, December, and 2025.

How does the Federal Reserve's interest rate cut historically affect the stock market in the short run?

Historically, the stock market can go either way in the short run (3 to 9 months) after the Federal Reserve starts cutting interest rates.

What is the long-term effect of the Federal Reserve's interest rate cut on the stock market?

In the long run, the stock market tends to go up after the Federal Reserve starts cutting interest rates.

How will the interest rate cut by the Federal Reserve impact the housing market?

The interest rate cut will likely cause mortgage interest rates to drop further and apply inflationary pressure to home prices.

What is the expected change in interest rates for savings accounts and CDs due to the Federal Reserve's action?

Interest rates on savings accounts and CDs are expected to go down following the Federal Reserve's interest rate cut.

What is the recommended strategy for locking in a CD rate given the expected interest rate cut?

It is recommended not to lock in a rate below 4% and to consider terms of 3 to 9 months, aiming for 4.5% or above.

How does the devaluation of the US dollar compare to other fiat currencies in the context of the Federal Reserve's interest rate cut?

The devaluation of the US dollar may not be significant compared to other fiat currencies as they are also moving towards easier monetary policies.

What are the two predictions made regarding the labor market and inflation following the Federal Reserve's interest rate cut?

The labor market is predicted to remain bad for the rest of the year, and the easy monetary policy is expected to re-accelerate inflation, potentially worsening the situation by 2026.

Outlines

00:00

📉 Federal Reserve's Interest Rate Cut Predictions

The speaker provides a two-day warning about the Federal Reserve's anticipated interest rate cut on September 18th, speculating on whether it will be by 0.25% or 0.5%. Market expectations, as of Monday, suggest a 39% chance for a 0.25% cut and a 61% chance for a 0.5% cut. The Federal Reserve's projections on this day will offer insights into future rate cuts in November, December, and into 2025, indicating a continued trend of rate reductions. Historical stock market reactions to interest rate cuts are reviewed, with the video detailing short-term and long-term performances post-FED pivots. The speaker also discusses the impact on the housing market, with mortgage rates expected to drop further and home prices potentially facing inflationary pressures. Additionally, the effect on savings accounts and CDs is addressed, with the speaker advising against locking in low rates and recommending shorter-term CDs for better returns by mid-2025.

05:01

💼 Labor Market and Inflation Predictions Amid Monetary Policy Changes

In the second paragraph, the speaker discusses the Federal Reserve's dual mandate of boosting labor markets and controlling inflation. They predict that the labor market will remain challenging for the rest of the year, advising job seekers not to be overly optimistic. The speaker also warns that the easy monetary policy will lead to a resurgence of inflation, although there may be a lag before its effects are felt. They forecast a worse economic situation in 2026 compared to 2024. The speaker ends by inviting viewers to share their thoughts and encourages subscription for more content.

Keywords

💡Federal Reserve

The Federal Reserve, often referred to as the Fed, is the central banking system of the United States. It plays a crucial role in implementing monetary policy, including interest rate decisions that influence the economy. In the video, the speaker discusses the Fed's upcoming decision to cut interest rates, which is a significant economic event that can affect various financial markets.

💡Interest Rates

Interest rates are the cost of borrowing money and the return on saving money, set by central banks like the Federal Reserve. The video focuses on the Fed's potential decision to cut interest rates, which can stimulate economic growth by making borrowing cheaper and encouraging investment and spending.

💡0.25% or 0.5% cut

The speaker speculates on the magnitude of the interest rate cut by the Federal Reserve, either by 0.25% or 0.5%. This decision is significant as it indicates the central bank's stance on economic conditions and can have wide-ranging effects on financial markets and the broader economy.

💡Market Expectations

Market expectations refer to the collective predictions of market participants about future economic events, such as interest rate changes. The video mentions a 39% chance of a 0.25% cut and a 61% chance of a 0.5% cut, reflecting the market's anticipation of the Fed's decision.

💡Fed Watch Tool

The Fed Watch Tool is a resource mentioned in the video that tracks market expectations for Federal Reserve decisions. It provides a visual representation of the likelihood of different outcomes, which can be crucial for investors and economists in making informed decisions.

💡Stock Market

The stock market is a platform where shares of publicly traded companies are bought and sold. The video discusses how the stock market may react to the Federal Reserve's interest rate cuts, historically and in the future, which is a key concern for investors.

💡Housing Market

The housing market involves the buying and selling of residential properties. The video connects the Federal Reserve's interest rate decisions to the housing market, suggesting that lower rates can influence mortgage rates and home prices, which is important for potential homebuyers and those looking to refinance.

💡Inflationary Pressure

Inflationary pressure refers to factors that can lead to an increase in the general price level of goods and services. The video suggests that the Fed's rate cuts could contribute to inflationary pressure in the housing market, which can affect the affordability of homes.

💡Savings Accounts and CDs

Savings accounts and certificates of deposit (CDs) are financial products offered by banks where individuals can deposit money and earn interest. The video addresses the impact of interest rate cuts on the rates offered by these products, which is relevant for those looking to save or invest money.

💡Devaluation of the Dollar

Devaluation of the dollar refers to a decrease in the value of the US currency relative to other currencies or commodities. The video discusses the potential for the Fed's monetary policy to devalue the dollar, which can have implications for international trade and investment.

💡Dual Mandates

The dual mandates refer to the Federal Reserve's dual objectives of maximum employment and stable prices. The video mentions that the Fed's interest rate cuts are intended to support the labor market, but the speaker predicts that the labor market will remain challenging, indicating a complex relationship between monetary policy and economic outcomes.

Highlights

The Federal Reserve is expected to cut interest rates on September 18th.

There is a 39% chance of a 0.25% cut and a 61% chance of a 0.5% cut according to the C fed watch tool.

A half-point cut is currently favored by the market.

The Federal Reserve will provide economic projections after the rate cut, offering insight into future decisions.

This rate cut marks a significant 'Fed pivot', indicating further cuts are likely.

Historically, the stock market has varied in the short term but tends to rise in the long term after rate cuts.

A video detailing how the stock market reacts to Federal Reserve rate cuts is available for reference.

If the stock market crashes, there's advice on how to prepare and what actions to avoid.

Interest rate cuts will affect the housing market, with mortgage rates expected to drop further.

Inflationary pressure on home prices is anticipated due to the rate cuts.

Interest rates on savings accounts and CDs are likely to decrease following the rate cuts.

Currently, some banks offer 4% to 5% interest rates, but these are expected to drop by a percentage point by 2025.

It's recommended not to lock in a CD rate below 4% and to consider shorter terms like 3 to 9 months.

The devaluation of the US dollar in comparison to other fiat currencies may not be significant as other countries are also easing monetary policies.

The devaluation of the US dollar against commodities is expected due to the rate cuts.

The Federal Reserve's rate cut aims to support labor markets, but the labor market is predicted to remain challenging.

The easy monetary policy is expected to re-accelerate inflation, with a prediction that 2026 will be worse than 2024.

The speaker invites viewers to share their thoughts and subscribe for more content.

Transcripts

so today is your two-day warning I want

you to know that the Federal Reserve

will cut interest rates on Wednesday

September 18th the big question is will

they cut interest rates by 0.25% or

0.5% so here are the odds according to

the C fed watch tool so this is as of

Monday the market expectation is that

there's a 39% chance that they cut

interest rates by

0.25% a 61% chance that they cut

interest rates by

0.5% so I want you to know that a half

point cut is actually favored at the

moment now I want you to know this on

Wednesday the Federal Reserve will also

give their projections so that's going

to really give us Insight a better

understanding of what they're going to

do in November December and also in 2025

because we know that this first interest

rate cut this is the Fed pivot it's

significant because they're going to

keep on cutting this is just the start

now in today's video I want to clarify

the most important aspects walking into

Wednesday so that you know what to

expect regarding the stock markets I

made a video a few weeks back showing

you historically how the stock market

reacts once the Federal Reserve starts

cutting interest rates so in that video

I cover the short run 3 months 6 months

and 9 months after the FED pivots and we

also reviewed the performance after a

few years so long story short in the

short run it can go either either way in

the long run the stock market just goes

up like if you don't believe me watch

the video it's very detailed it'll be

very helpful I will leave a link for you

down below now if the stock market does

crash I made a video to help you prepare

for that in that video I go over

specifically what you should do and what

you should not do so that's the stock

market now when the Federal Reserve

starts cutting interest rates yes that's

going to greatly affect the housing

markets so you could see it already the

mortgage interest rates in anticipation

have already started dropping but

they're going to fall even further also

it will apply inflationary pressure to

home

prices so if you want more information

about this please check out this video

so I know that this is a very important

topic for people that are looking to buy

a home right now and also for millions

of people that are looking to refinance

so I'll leave a link down below now I've

been seeing this question a lot in the

comments so if the Federal Reserve

starts cutting interest rates will the

interest rates on savings accounts and

CDs go down and the answer is yes of

course they will but the question is how

quickly are they going to fall so let me

start by just saying this if you and

most of you already know this if you

bank with a large Bank let's just say

Chase Bank they're probably paying you

what 0% or very close to 0% right but

there are many reputable Banks right now

and they're paying 4% they're paying 5%

for a savings account or a CD

and if you have money that you're just

parking for the short term for let's

just say a down payment or you know in

an emergency fund yeah it's nice to be

enjoying that 4% to 5% interest rate but

by the middle of 2025 you can say I mean

you can expect that that's going to get

knocked down by a full percentage point

so right now if they're paying 4% to 5%

I would expect it to be 3% to 4% I would

say middle of 2025 you're not going to

find any Bank that's offering 5% so if

you do want to lock in money in the CD

right now I would personally I would not

lock in a rate anything under 4% I just

wouldn't do it I would honestly look for

4.5% or above I know that many

institutions are still offering 5% or

above personally I wouldn't lock up my

money in a CD right now for anything

longer than 12 months I wouldn't even do

12 months but that's just me I would

personally look for something 3 69

months and I do want to say this because

personally this is something that really

gets me this is something I'm doing on a

day-to-day basis and it's just

completely wrong what I hear a lot of

people saying I hear a lot of people

saying that well this is going to

completely devalue the dollar okay

partially true but the question is

devalue the dollar in comparison to what

because if you're if you're going to say

it's going to devalue the dollar

compared to another fiat currency that's

not necessarily true because other

countries are doing the same thing other

countries are moving towards an easier

monetary policy they're lowering

interest rates and they're printing

money as well so if the US dollar is

devaluing but other Fiat currencies are

devaluing as well then well that

statement it's not necessarily true if

you're saying it's going to devalue the

US dollar is going to devalue in

comparison to Commodities then yeah of

course everybody knows that and here are

the last two things that I do want to

touch upon so the first thing is well

the Federal Reserve says that they're

going to cut interest rates because of

their dual mandates and this is to boost

or help the labor markets

right I guarantee you that the labor

market is going to remain bad for the

rest of the year there's not going to be

any saving here so don't get your hopes

up especially if you're in the job

market right now you're looking for a

job and number two this easy monetary

policy will re accelerate inflation it's

guaranteed to happen you're not going to

see it immediately there's going to be a

lag time but it will come back with a

Vengeance my prediction is that the

situation is going to be worse in 2026

compared to this year in

2024 so I'll see you on Wednesday please

let me know what you think Please

Subscribe I thank you for the support

and I wish you a very nice day take care